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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






2. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






3. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






4. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






5. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






6. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






7. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






8. Ed = 1






9. A good for which higher income decreases demand






10. A good for which higher income increases demand






11. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






12. Demand for a resource like labor is derived from the demand for the goods produced by the resource






13. Two goods are consumer substitutes if they provide essentially the same utility to consumers






14. Es = (%dQs) / (%dPrice)






15. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






16. Models where firms agree to mutually improve their situation






17. When firms focus their resources on production of goods for which they have comparative advantage






18. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






19. The lost net benefit to society caused by a movement away from the competitive market equilibrium






20. The price of a good measured in units of currency






21. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






22. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






23. Ed = 0 - no response to price change






24. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






25. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






26. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






27. The difference between total revenue and total explicit and implicit costs






28. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






29. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






30. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






31. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






32. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






33. ATC = TC/Q = AFC + AVC






34. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






35. Entry of new firms shifts the cost curves for all firms upward






36. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






37. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






38. Exists at the point where the quantity supplied equals the quantity demanded






39. Exists if a producer can produce more of a good than all other producers






40. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






41. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






42. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






43. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






44. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






45. Total product divided by labor employed. APL = TPL/L






46. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






47. AFC = TFC/Q






48. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






49. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






50. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good